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Can Cheaper EVs Save Rivian (RIVN) Stock?

  • Electric vehicle upstart Rivian Automotive (RIVN) popped significantly higher on Friday.
  • A new drive unit may help improve efficiency and lower production costs.
  • RIVN stock still faces a broader economic challenge.
RIVN stock - Can Cheaper EVs Save Rivian (RIVN) Stock?

Source: Tada Images / Shutterstock.com

Though one of the most exciting new competitors in the electric vehicle scene, Rivian Automotive (NASDAQ:RIVN) suffered significant investment losses since its initial public offering (IPO). Nevertheless, RIVN stock popped higher heading into the holiday weekend thanks to an encouraging production development.

Specifically, Rivian debuted its new Enduro drive unit for retail customers. Previously, it offered the Enduro unit for the electric delivery vans (EDVs) Rivian manufactures for e-commerce giant Amazon (NASDAQ:AMZN).

Thanks to the Enduro’s improved efficiency and lower production cost profile, many investors hope that this development will push the needle forward for RIVN stock. While undoubtedly intriguing, prospective traders must also consider the broader economic framework.

RIVN Stock Gets Much-Needed Pricing Diversity

What started out as a viable alternative to Tesla (NASDAQ:TSLA) eventually ballooned out of control for Rivian, with MotorTrend reporting last year that the cheapest quad-motor R1T Max pack (electric pickup truck) stood at $90,315. However, the latest Enduro will bring the starting price of the R1T down to $73,000.

Such a dramatic cost improvement is mainly possible because of the manufacturing profile of the Enduro. Rather than integrating a third-party drive unit (which is the case for Rivian’s quad-motor setup), the dual-motor Enduro is built in-house.

Although Rivian has worked on its dual-motor unit for some time, the business focused on EDVs for Amazon, which actually is configured in a single-motor, front-wheel drive framework. The retail version, of which deliveries will begin in June, will feature a dual-motor, all-wheel-drive (AWD) setup. Naturally, enthusiasm rang high for RIVN stock, with Rivian Vice President of Manufacturing Operations Tim Fallon stating the following:

“I’m unbelievably proud of what all our teams have accomplished. Introducing our Dual-Motor variants is a major milestone in ramping our facility to its full capacity, and they have done a great job working across so many functions to make this happen.”

Better yet, drivers shouldn’t see that much of a performance downgrade. According to Rivian’s website, the dual-motor AWD model will accelerate the R1T to 60 miles per hour from a standstill in 4.5 seconds. That’s plenty quick. While the quad-motor AWD does the same in 3 seconds, such performance is really unnecessary for the average commuter.

Efficiency Improvements a Welcome Shift but Challenges Linger

With a combination of traditional architectural elements integrated with modern styling cues, the Rivian R1T caught the eye of many consumers. Unfortunately, as Edmunds reported in its real-world EV range tests, the R1T fell short in the efficiency department.

In discussing mileage, Edmunds stated, “…the R1T is by far the least efficient EV we’ve tested yet.” Notably, it also remarked that “… the Rivian’s Edmunds consumption rate of 46.9 kWh/100 miles means it uses nearly 23% more energy per 100 miles than the next most power-hungry EV we’ve tested, the Audi e-tron Sportback, which clocked in at 38.2 kWh/100 miles.”

Therefore, with the dual motor, drivers should find not only a lower entry point but also lower “refueling” costs. At the same time, the question should be, are these factors enough to make a substantive difference for RIVN stock?

So far, it’s a tepid “yes.” While RIVN stock did move up about 5% today, it’s still down nearly 12% year-to-date and 48% compared to last year. Of course, the problem centers on the consumer economy. Even at $73,000, that’s mighty expensive for most people, particularly with the outside pressures of stubborn inflation and mass layoffs. According to the U.S. Census Bureau, the real median household income in 2021 sat at $70,784.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2023/05/can-cheaper-evs-save-rivian-rivn-stock/.

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